UK GDP economy rises to 5 year high

UK third quarter provisional GDP has surprised even the optimists with a +1% number.UK GDP economy rises to 5 year highIt is therefore  unsurprising that David Cameron could not contain himself by hinting on the expected good news yesterday.

The median forecast was for +0.6% and thus the number is well above expectations.

The Pound is rallying on the news and is up and continuing to push higher against the euro and the US Dollar.

The UK GDP figures will be a welcome relief for the government as the UK economy emerges from a double dip recession with the strongest quarter on quarter growth for five years.

Yesterday Mervyn King suggested that the bank stood ready for more stimulus if necessary but also warned that the limits of the effectiveness of monetary easing was being reached.

The Pound could now be in line for further gains with the sentiment of the UK economy turning more optimistic and putting the worst behind it coupled with less chance of further central bank stimulus.

Over to the US and the FOMC offered no substantial changes to policy and thus we did not see any significant movements in the markets.

The next FOMC meeting on Dec 12 will be of more note and we are likely to learn more on a decision for operation twist to be extended or completed.

At the next meeting we could also see more treasury bond buying and this may be in combination with QE3 MBS buying at the current pace of $40 billion per month or more.

Before this decision the Fed will gauge economic indicators and in particular the health of the labour market and of course digest the election outcome.

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